Purpose of this brief
The government has introduced legislation, in the form of a statutory instrument, to remove the requirement for businesses to report information to HMRC about sales of mobile phones or computer chips in the UK — known as the Reverse Charge Sales List.
This change takes effect from 1 July 2022. However, it does not remove the requirement for you to operate the domestic reverse charge procedure.
The purpose of this brief is to provide guidance on this change.
Who needs to read this
If you are registered or liable to be registered for VAT and sell mobile phones or computer chips in the UK under the VAT domestic reverse charge procedure.
A domestic reverse charge means the UK customer receiving supplies of mobile phones or computer chips must account for the VAT due on these supplies on their VAT return rather than the UK supplier.
The customer can deduct the VAT due on the supplies as input tax, meaning no net tax is payable to HMRC, subject to the normal rules for reclaiming VAT. This removes the scope for fraudsters to steal the VAT due to HMRC. Similar measures have been introduced in response to criminal threats for carbon emissions allowances, gas and electricity, telecommunication services, trading of renewable energy certificates and construction services.
The domestic reverse charge for mobile phones and computer chips was introduced in June 2007 and was the only one with a requirement to complete a Reverse Charge Sales List. If you sell mobile phones or computer chips in the UK you are required to submit a Reverse Charge Sales List with each of your VAT return periods.
For each customer you make a reverse charge sale to, you report to HMRC the relevant period, the UK VAT registration number of the customer and the total net value of reverse charge sales to that customer for each calendar month in the VAT period.
Timing of implementation
The change takes effect from 1 July 2022.
This means that from this date, if you sell mobile phones or computer chips in the UK, you will no longer need to compile and submit information about these sales to HMRC.
However, the domestic reverse charge remains in place and you must still operate that accounting procedure.
The domestic reverse charge mechanism
Under the domestic reverse charge, it is the responsibility of the customer, rather than the supplier, to account to HMRC for VAT on supplies of mobile phones and computer chips. It only applies to business-to-business transactions in the UK if those businesses are registered or liable to be registered for VAT.
There is a de minimis rule for this particular domestic reverse charge so that supplies under £5,000 are excluded from it.
Changes to the Reverse Charge Sales List
Supplying mobile phones and computer chips up to 30 June 2022
The domestic reverse charge continues to apply and it is still a requirement for you to submit a Reverse Charge Sales List with your VAT return.
If you submit:
- monthly VAT returns — a final Reverse Charge Sales List will need to be submitted with the 06/22 VAT return
- quarterly VAT returns — a final Reverse Charge Sales List will need to be submitted with either the 06/22, 07/22 or 08/22 VAT return
The online service for submitting the Reverse Charge Sales List will be switched off on 17 October 2022 and you will no longer be able to send Reverse Charge Sales List information to HMRC this way.
If you submit annual VAT returns or non-standard VAT returns that will be filed on or after 17 October 2022 you will need to submit a separate Reverse Charge Sales List for the period up to 30 June 2022. This needs to be filed after 1 July 2022 and before 17 October 2022.
Any corrections required to Reverse Charge Sales Lists already submitted will need to be made before 17 October 2022.
Changes from 1 July 2022
The domestic reverse charge continues to apply after 1 July 2022.
However, if you are a UK business selling mobile phones or computer chips to UK customers you will no longer be required to compile and submit sales information to HMRC with your VAT returns for periods 1 July 2022 onwards.
Further guidance on the domestic reverse charge
Detailed guidance on the other domestic reverse charges can be found in the Domestic reverse charge procedure (VAT Notice 735). This will be updated in due course to include guidance about this change.
Section 1(2) of the VAT Act 1994 (VATA) makes the supplier liable for any VAT in supplies of goods or services.
Section 55A of VATA provides that the recipient of a supply must account for the VAT due on supplies of a kind specified in an order made by the Treasury.
The reverse charge for mobile phones and computer chips was introduced in June 2007 by The Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2007 (SI/2007/1417). This was amended by The Value Added Tax (Section 55A) (Specified Goods and Services and Excepted Supplies) Order 2010 (SI/2010/2239).
The Reverse Charge Sales List was introduced at the same time by amending the Value Added Tax regulations 1995 by inserting regulations 23A to 23D (SI/2007/1418, SI/2007/1599 and SI/2014/1497).
A statutory instrument (2022/548) brings the relevant changes into effect.
For further information contact the VAT Helpline.